The Effect of the End of Hiring Incentives on Job and Employment Security

We analyse the long-term impact of hiring subsidies on both job and employment security. The subsidy that we examine was introduced in Italy through the 2015 Budget Law, with the goal of promoting open-ended contracts. We employ a non-linear difference-in-differences (NL-DiD) approach within a duration framework, using high-frequency, population-wide linked employer-employee administrative data from a large Italian region. Causal results on job security indicate that the subsidy’s protective effect is short-lived. Excess separations from subsidised jobs peak in the exact same month in which the monetary incentive expires. No long-term protective effect of the subsidy is observed regarding employment security. These results hold across a wide range of worker and firm characteristics, showing surprisingly little heterogeneity. One notable exception concerns firm size. Furthermore, the expiration of subsidies disproportionately affects workers with low human capital. Our findings suggest that hiring subsidies are not effective in promoting either job or employment security for beneficiaries and that this raises questions about the efficacy of this common and costly policy, particularly when offered unconditionally.